Following acquisition talks in April,
FedEx Corporation
(
FDX
) has finally reached an agreement to acquire TATEX Express.
French-based TATEX Express provides courier and express transport
services to industrial customers across Europe and international
markets.
Although the terms of the deal remain undisclosed, we expect
FedEx to gain from TATEX's proven market position. TATEX ships 19
million parcels annually, accounting for 150 million Euros in sales
revenue.
Following the announcement of the proposed acquisition of Opek
Sp.z o.o, this remains the second move by the company to enter the
European package delivery market.
FedEx comes second in the sector to carry out strategic
acquisitions by targeting smaller businesses.It follows the $6.77
billion ($5.16 billion euro) pipeline acquisition of Dutch shipping
company TNT Express by the largest package delivery company,
United Parcel Service
(
UPS
).
Prior to TATEX, FedEx proposed to acquire Opek Sp.z o.o. Upon
completion of the acquisition, it is estimated to garner annual
revenue and shipments of $70 million and 12.5 million,
respectively.
We believe that the acquisition pattern of FedEx remains
impressive as these smaller acquisitions with their diversified
businesses will enable the company to spread its wings across a
variety of target markets. For instance, TATEX is typically
involved in a B2B process. On the other hand, Opek has a business
of standard parcel delivery across Poland, mostly involving Ground
deliveries.
Further, these two companies have different networks of
operation. TATEX is focused on business across France and
international markets, while Opek's business is typically
concentrated in Poland. We believe the acquisition of these small
companies, which have a strong foothold in local markets, will help
FedEx gain from the fragmented European package delivery
market.
In financial terms, overall exposure to risk also remains low
for FedEx, given the smaller size of these businesses. It also
entails lower investment compared to UPS' ambitious TNT Express
acquisition plan.
TNT Express remains a promising bet for United Parcel with
annual revenues of more than €45 billion ($60 billion) but
considering the economic upheavals in the global market, uncertain
business results from even giant corporations cannot be completely
ruled out.
Overall, it remains difficult to quantify the near-term
financial gains that these companies (FedEx and UPS) will derive
out of their European expansion, where sovereign debt concerns
could significantly weigh on the economic recovery. However,
long-term prospects of these acquisitions look
promising.
There are foreseeable opportunities not only in Europe but in
emerging markets like China, India, Japan and Brazil, as well as
other Asian markets for international growth.
Currently, FedEx retains a Zacks #3 Rank (short-term Hold
recommendation). We also reiterate our long-term Neutral rating on
the stock.
FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research